CHINA’S ENERGY CONSUMPTION AND OPPORTUNITIES FOR U.S.-CHINA COOPERATION TO ADDRESS THE EFFECTS OF CHINA’S ENERGY USE HEARING BEFORE THE U.S.-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION ONE HUNDRED TENTH CONGRESS FIRST SESSION _________ JUNE 14-15, 2007 _________ Printed for use of the United States-China Economic and Security Review Commission Available via the World Wide Web: www.uscc.gov UNITED STATES-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION WASHINGTON : SEPTEMBER 2007 U.S.-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION CAROLYN BARTHOLOMEW, Chairman DANIEL BLUMENTH AL, Vice Chairman Commissioners: PETER T.R. BROOKES Hon. WILLIAM A. REINSCH Hon. C. RICHARD D’AMATO Hon. DENNIS C. SHEA MARK ESPER PETER VIDENIEKS JEFFREY FIEDLER MICHAEL R. WESSEL KERRI HOUSTON LARRY M. WORTZEL T. SCOTT BUNTON, Executive Director KATHLEEN J. MICHELS, Associate Director The Commission was created on October 30, 2000 by the Floyd D. Spence National Defense Authorization Act for 2001 § 1238, Public Law No. 106-398, 114 STAT. 1654A-334 (2000) (codified at 22 U.S.C.§ 7002 (2001), as amended by the Treasury and General Government Appropriations Act for 2002 § 645 (regarding employment status of staff) & § 648 (regarding changing annual report due date from March to June), Public Law No. 107-67, 115 STAT. 514 (Nov. 12, 2001); as amended by Division P of the "Consolidated Appropriations Resolution, 2003," Pub L. No. 108-7 (Feb. 20, 2003) (regarding Commission name change, terms of Commissioners, and responsibilities of Commission); as amended by Public Law No. 109-108 (H.R. 2862) (Nov. 22, 2005) (regarding responsibilities of Commission and applicability of FACA). The Commission’s full charter http://www.uscc.gov/about/charter.php and Statutory Mandate http://www.uscc.gov/about/overview.php available via the World Wide Web ii CONTENTS _____ THURSDAY, June 14, 2007 CHINA’S ENERGY CONSUMPTION AND OPPORTUNITIES FOR U.S.-CHINA COOPERATION TO ADDRESS THE EFFECTS OF CHINA’S ENERGY USE Opening statement of Chairman Carolyn Bartholomew …………………….. 1 Prepared statement………………………………………………………….. 2 Opening statement of Vice Chairman Daniel A. Blumenthal, Hearing Cochair. 4 Prepared statement …………………………………………………………. 5 Opening statement of Commissioner Peter Videnieks, Hearing Cochair ……. 5 Prepared statement………………………………………………………….. 6 Opening statement of Commissioner C. Richard D’Amato, Hearing Cochair … 162 Prepared statement…………………………………………………………… 164 Opening statement of Commissioner Dennis C. Shea, Hearing Cochair …….. 164 Prepared statement …………………………………………………………… 166 PANEL I: ADMINISTRATION PERSPECTIVES Statement of The Honorable Judith E. Ayres, Assistant Administrator for International Affairs, U.S. Environmental Protection Agency, Washington, D.C. 8 Prepared statement …………………………………………………………… 11 Statement of The Honorable Karen A. Harbert, Assistant Secretary, Office of Policy and International Affairs, U.S. Department of Energy, Washington, DC 11 Prepared statement…………………………………………………………… 16 Panel I: Discussion, Questions and Answers …………………………………. 16 PANEL II: U.S. NATIONAL LABORATORY PERSPECTIVES Statement of Dr. Jane S. Long, Associate Director, Energy and Environment Directorate, Lawrence Livermore National Laboratory, Livermore, California ……………………………………………………………………. 37 Prepared statement ……………………………………………………………… 39 Panel II: Discussion, Questions and Answers ………………………………… 39 PANEL III: CHINESE ENERGY CONSUMPTION PATTERNS AND TRENDS: A BASELINE ASSESSMENT Statement of Mr. Saad Rahim, Manager, Country Strategies Group, PFC Energy, Washington, D.C. …………………………………………………………………. 53 Prepared statement………………………………………………………………. 56 iii Statement of Mr. Trevor Houser, Visiting Fellow, Colin Powell Center for Policy Studies; Director, Energy Practice, China Strategy Advisory, L.L.C., New York, New York ………………………………………………………………………. 66 Prepared statement ……………………………………………………………. 70 Statement of Dr. Lee Schipper and Wei-Shiuen Ng, Director of Research, EMBARQ, World Resources Institute, Washington, D.C. .…………………… 70 Prepared statement …………………………………………………………… 73 Panel III: Discussion, Questions and Answers ………………………………… 73 PANEL IV: THE STRATEGIC CONSEQUENCES FOR THE UNITED STATES AND THE WORLD OF CHINA’S ENERGY CONSUMPTION Statement of J.R. Holmes, Ph.D., Associate Professor, Strategy and Policy Department, U.S. Naval War College, Newport, Rhode Island …………………. 97 Prepared statement……………………………………………………………. 99 Statement of Dr. Toshi Yoshihara, Associate Professor, Strategic Research Department, Naval War College, Newport, Rhode Island ……………………….. 99 Prepared statement ……………………………………………………………. 100 Statement of Mr. Mikkal E. Herberg, Research Director, Asian Energy Security Program, The National Bureau of Asian Research, Seattle, Washington ………. 103 Prepared statement……………………………………………………………. 106 Panel IV: Discussion, Questions and Answers………………………………… 111 PANEL V: THE ENVIRONMENTAL CONSEQUENCES FOR CHINA, THE UNITED STATES, AND THE WORLD OF CHINA’S ENERGY CONSUMPTION Statement of Dr. Jennifer L. Turner, Coordinator, China Environmental Forum, Woodrow Wilson International Center for Scholars, Washington, D.C. 132 Prepared statement………………………………………………………………. 137 Statement of Dr. Mun S. Ho, Institute of Quantitative Social Science, Harvard University, Visiting Scholar, Resources for the Future, Washington, D.C. ………. 145 Prepared statement……………………………………………………………… 148 Panel V: Discussion, Questions and Answers…………………………………… 148 FRIDAY, JUNE 15, 2007 PANEL VI: GUBERNATORIAL PERSPECTIVES Statement of Brian Schweitzer, Governor of the State of Montana……………… 167 Statement of Joe Manchin, Governor of the State of West Virginia …………… 172 Prepared statement ……………………………………………………………… 177 Panel VI: Discussion, Questions and Answers…………………………………… 180 iv PANEL VII: POLICY STRATEGIES FOR ADDRESSING THE EFFECTS OF CHINA’S ENERGY CONSUMPTION Statement of Ms. Barbara Finamore, Director, China Program, National Resources Defense Council; President, China-U.S. Energy Efficiency Alliance, Washington, D.C. ………………………………………………………………… 206 Prepared statement ……………………………………………………………… 210 Statement of Mr. Thomas Donnelly, Resident Fellow in Defense and Foreign Policy Studies, American Enterprise Institute, Washington, D.C. ………………... 210 Prepared statement ………………………………………………………………. 213 Statement of Dr. Jeffrey Logan …………………………………………………….215 Prepared statement ………………………………………………………………. 218 Panel VII: Discussion, Questions and Answers ………………………………….. 218 PANEL VIII: ADMINISTRATIVE PERSPECTIVES Statement of Mr. David F. Helvey, Director, China, Taiwan and Mongolia Affairs, Office of the Deputy Under Secretary of Defense, Asian & Pacific Security Affairs, Department of Defense, Washington, D.C. ……………………………………… 236 Prepared statement …………………………………………………………….. 242 Panel VII: Discussion, Questions and Answers ………………………………… 248 PANEL IX: PRIVATE SECTOR STRATEGIES FOR ADDRESSING THE EFFECTS OF CHINA’S ENERGY CONSUMPTION Statement of Mr. John Sie, Institute for Sino-American International Dialogue, University of Denver, Denver, Colorado ………………………………………… 261 Statement of Kelly Sims Gallagher, Ph.D., Director, Energy Technology Innovation Policy, Belfer Center for Science & International Affairs, John F. Kennedy School of Government, Harvard University, Cambridge, MA. ………. 272 Prepared statement ……………………………………………………………. 275 Statement of Mr. Wayne L. Rogers, Partner, Sonnenschein Nath & Rosenthal, Washington, D.C. …………………………………………………………………. 275 Prepared statement ………………………………………………………………. 282 Panel IX: Discussion, Questions and Answers …………………………………… 282 CONGRESSIONAL PERSPECTIVES: Statement of Roscoe Bartlett, a U.S. Representative from the State of Maryland… 262 Prepared statement ……………………………………………………………… 267 v PANEL X: U.S.-CHINA GOVERNMENTAL AND NONGOVERNMENTAL COOPERATIVE PROGRAMS IN ENERGY AND THE ENVIRONMENT Statement of Dr. S.T. Hsieh, Director, U.S./China Energy and Environmental Technology Center, Tulane University, New Orleans, Louisiana ………………. 292 Prepared statement …………………………………………………………….. 294 Statement of Dr. Wei-Ping Pan, Director and Sumpter Professor, Institute for Combustion Science and Environmental Technology, Western Kentucky University, Bowling Green, Kentucky …………………………………………… 295 Prepared statement ……………………………………………………………… 296 Statement of Mr. Michael J. Mudd, Chief Executive Officer, FutureGen Alliance, Washington, D.C. …………………………………………………………………. 297 Prepared statement ……………………………………………………………… 300 Panel X: Discussion, Questions and Answers …………………………………… 303 ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD Statement of Dr. Elizabeth Economy, C.V. Starr Senior Fellow, Director of Asia Studies, Council on Foreign Relations, New York, New York …………….. 313 Statement of Dr. Mark Levine, Director, Environmental Energy Technologies Division, Lawrence Berkeley National Laboratory, Berkeley, California ……….. 313 vi CHINA'S ENERGY CONSUMPTION AND OPPORTUNITIES FOR U.S.-CHINA COOPERATION TO ADDRESS THE EFFECTS OF CHINA'S ENERGY USE _________ THURSDAY, JUNE 14, 2007 U.S.-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION Washington, D.C. The Commission met in Room 385, Russell Senate Office Building, Washington, D.C. at 9:07 a.m., Chairman Carolyn Bartholomew, Vice Chairman Daniel A. Blumenthal, and Commissioners Richard D’Amato, Dennis C. Shea and Peter Videnieks (Hearing Cochairs), presiding. OPENING STATEMENT OF CHAIRMAN CAROLYN BARTHOLOMEW CHAIRMAN BARTHOLOMEW: Good morning, everyone. We'll go ahead and get started. We are waiting for one of our other witnesses to arrive, but we thought we would